Amazon latest to join trillion-dollar market cap club amid AI-fuelled rally
Amazon's share price jumped 3.9% to $193.6 (€180.2), reaching a new high on Wednesday. The surge took its market capitalisation to $2.01 trillion (€1.95 trillion), making the US e-commerce giant the fifth largest company in the trillion-dollar club, behind Microsoft, Apple, Nvidia, and Alphabet. Meta Platforms is in sixth place, with a market cap of $1.3 trillion (€1.2 trillion).
The AI frenzy continued to fuel the rally on Wall Street in June, with investors reallocating their funds across the top tech giants. These companies have been competing in AI advancements to gain market share. Nvidia's market capitalisation topped $3 trillion in early June, briefly making it the world's most valuable company due to its surging AI chip sales. Apple's shares soared after the iPhone maker announced its AI adoption and partnership with OpenAI.
Strong competition in cloud services
The cloud division is the particular focus of investors in software-centric companies such as Amazon's AWS, Microsoft's Azure, and Alphabet's Google Cloud. Investors hold optimism towards Amazon's fast-growing cloud business, AWS, powered by AI. According to the market research firm Synergy, the global cloud services market reached a record of $76 billion in the first quarter. The combined market share of AWS, Microsoft, and Google Cloud accounted for 67%, with Amazon's AWS steadily holding the crown. Statista shows that AWS controlled 31% of the entire market, followed by Microsoft Azure at 25% and Google Cloud at 10%.
Since 2023, Microsoft has led the AI race with the launch of ChatGPT, compelling other tech companies to accelerate their AI development and integrate it into their cloud businesses. "Organisations use cloud services from these vendors for machine learning, data analytics, cloud-native development, application migration, and other services," said research firm Statista.
Amazon's AWS growth accelerated in first quarter
Amazon's shares have gained 28% this year and 50% compared with the same time last year. In the first quarter, its AWS growth accelerated, with the segment's revenue reaching $25 billion, up 17% from the same quarter in 2023. The performance significantly surpassed the estimated $24.5 billion with 12% growth.
AWS is regarded as a pivotal core business of the company, being its most profitable division and contributing 62% of the total operating profit. In the first quarter, the division's operating income amounted to $9.4 billion, nearly double the figure from the same quarter last year. Moreover, the cloud business generated 17% of the overall revenue, with an operating margin of 38%, marking a notable acceleration in growth of 14% and 30%, respectively, from the final quarter of 2023.
A combination of factors has contributed to AWS's growth, including AI adoption, enhanced business spending on cloud computing, and cost-cutting measures. Amazon is optimistic about the potential of the generative AI-powered assistant, Amazon Q, to assist its customers in software development and internal data analysis. Additionally, the extension of its "strategic collaboration" with Nvidia represents another significant advancement in the AI field.
In the company's annual letter to shareholders in April, CEO Andy Jassy said: "We're optimistic that much of this world-changing AI will be built on top of AWS."